Newly mint the groat if you want Scotland to be independent

The reason Alex Salmond cannot answer the currency question is he does not truly want Scotland to be independent. He wants devo max. An independent Scotland would mint its own coins and create its own currency. Putting the symbols of the nation on the banknotes is one of the ultimate acts of sovereignty.

Alex Salmond wants a dependent Scotland, dependent on the Bank of England for its money and interest rates, and dependent on the EU for much of its legislation and government. The problem with this model is the rest of the UK and the rest of the EU will have views on what kind of a deal he could do, were Scotland to vote for his new kind of dependence. It could be a worse deal all round than Scotland currently enjoys within the UK and under the umbrella of the UK’s selective and idiosyncratic membership of the EU. Scotland could not expect opt outs from the Euro, Schengen and full tax contributions to the EU in the way the UK has negotiated.

Putting the symbols of your country on the banknotes is more than a nice to have, more than mere display. It means that the currency is supported by the taxable capacity of the country which issues it. It means that country, with all its wealth, tax revenue and legal powers stands behind the currency.

In 2008-9 the UK state and the pound sterling stood behind the two large Scottish banks that were in financial trouble, RBS and HBOS. RBS was almost too large for the UK state to stand behind. Losing just 1% of its assets meant losing £22 billion. It is difficult to see how the Scottish state, with just 8% of the UK’s tax revenue, could have stood behind such a massive bank in a credible way.

Currency matters. The rest of the UK is right to signal we could not live with a so called independent Scotland staying in the pound. Surely there has been enough misery on the continent, as countries have struggled within the Euro zone because they do not share a tax, spending and transfers policy. If you share a currency with the neighbours you do need central control of tax, benefits, transfers and much else to make it work.

If Mr Salmond is as keen on membership of the EU as he usually claims, he should also be honest about the logic of the Euro. Were Scotland to join the EU on its own, why would it get a sweetheart deal to stay out of the most important federal policy of them all, the common currency?

The true answer to Mr Salmond’s question is just this. His kind of independent Scotland would need a transition period with the groat, its own currency, followed by full membership of the Euro. To join the Euro Scotland would be required to cut its debt and deficit to qualify.

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122 Comments

” If you share a currency with the neighbours you do need central control of tax, benefits, transfers and much else to make it work.”

That’s pretty much right. Except any country using someone else’s currency, and Germany is the obvious example, can make it work by running a large export surplus. Conversely, countries which don’t like France, Spain, Italy and Greece soon find themselves in deep trouble once they lose full control over their fiscal and monetary policy. The Euro would have been a disaster for the UK which traditionally runs a trade deficit. There’s nothing wrong with that. Not all countries can run a trade surplus.

An independent Scotland could possibly use the pound, independently, in the same way that Ecuador and Panama use the dollar independently of the USA. It would become a user of the pound, and not an issuer of the pound though. It wouldn’t have control over interest rates and would have to pay more than the rUK to cover the risk of a possible default. It is arguable whether it would be a better option than joining the Euro, the problems would be essentially the same.

On the Uk trade deficit, Robert Peston makes some excellent points. My view is that there is a big problem with running a trade deficit – currently around 5%. We have got away with it over the last 30 years or so but there will come a time when we have to pay our way.

RP- There will come a moment when investors who are currently prepared to lend to the British government at record low rates of interest will begin to question whether those interest rates properly capture the risks of lending to a country with a persistent inability to pay its way in the world in the broadest sense, with persistently low growth and with tax revenues that continuously fall short of squeezed government spending.

Probabably the most shocking and accurate assesment of the British economy I have heard from a mainstream journalist.
I wonder if Dr Redwood has a view on how close to the day of reckoning we are ie collapse in confidence of the Uk economy. I agree that our debts are modest compared to the assets of the British economy..but what use are they if they cannot be sold?. It would make an interesting piece your take on ‘Can the Uk pay it’s way and maintain creditor confidence’.

Reply Mr Peston has written a very dated and partial piece. He only talks about manufacturing exports, ignoring the substantial service sector exports, and ignores the flow of long term investment money into UK business and property. Much of the deficit is paid for or offset by foreign investment inflows, not short term foreign currency borrowing! No, I do not think overseas investors are about to lose confidence in the UK.

Yes, any borrowing in a foreign currency is hazardous. That should only be done in cases of extreme emergency.

But, borrowing in sterling, for the UK government, isn’t really borrowing at all. Issuing, either of currency itself or gilts, would be a better term, with inflation, rather than a potential default, being the only risk.

” Foreign investment inflows” ? By that, do you include the process of our overseas suppliers lending us back our £ payments for imports? They are generally very obliging in that respect, and happily buy Treasury gilts so that we can continue to be good customers. The Treasury does have to pass on that ‘investment’ by way of deficit spending, though, to get that money back into the hands of the real customers.

That’s often overlooked by those who wish to move quickly towards a budget surplus.

No, it is not a Ponzi scheme. All modern currencies are issued by governments and those governments insist that their taxes are paid using it. By doing that they create a demand for that currency. There is no need for gold and silver to be involved.

Ideally, it could be argued that all countries should have balanced trade. That’s obviously not going to happen, but I’d say anything within +/- 5% is perfectly acceptable. Though there is no theoretical justification for any particular figure.

It’s not the case that the UK seeks to borrow money from overseas to fund its trade gap. It’s the other way around. Countries want somewhere to store their money and so buy up UK securities. That forces up the pound and creates the conditions for that gap.

I presume you are an economist by trade as that is an economist’s answer!. The essence of the Ponzi model is the concealment of the lack of anything of sufficient substance and real value – the Uk economy in a nutshell. You cannot create wealth from nothing or defer payment of debt indefinitely.
Geroge Osborne and John Redwood (with his dogged belief in the wisdom of cannibalising the Uk’s asset base) seem to believe that they can economically do the equivalent of walking on water. Well they darn well can’t!.

Although not strictly a Ponzi scheme, the British economy does follow the Ponzi model of using an artificially-inflated housing market to channel ever greater quantities of debt into consumption. See George Osborne and his help to buy scheme and rock bottom interest rates.
The issuing of Uk securities is just another form of theft from savers as they will pay for this through inflation. All smoke and mirrors but it amounts to the same thing – we haven’t got enough real wealth anymore.

I am thoughtfull of your remarks on ‘foreign investment inflows’ as they are contradicted by Dr Tim Morgan’s . Dr Morgan describes net investment income as having gone ‘up in smoke’. The budget deficit seems to be getting worse not better over time – recently 4% now over 5%.

TM- ‘Britain’s current account deficit, meanwhile, reveals that we are rapidly running out of time. Though we’ve been in the red on trade for three decades, the big change revealed by this broader number is that our previous big surplus on net investment income has gone up in smoke. Profits and interest remitted out of Britain now exceed the amounts coming in, a situation that can only get worse as more assets are sold to foreign buyers, and more overseas debt is taken on’.

What is the truth here ?- have we a surplus in foreign investment inflows or has this gone into reverse. If Dr Morgan is corect, surely this would indicate deterioriating confidence in the Uk economy ?.
Prof. Redwood, have you a source to reference your assurance that ‘foreign investment inflows’ remain strong.

Reply You are confusing inward capital flows of investment, and inward flows of interest and dividends on outward investments we have made in the past.The former is strong and helping balance our payments.

Thanks again Professor Redwood for your time much appreciated . I note your point about the distinction between capital inflows.

It would seem that ‘inward capital flows of investment’ are largely generated by the buying up of Uk intelectual property, Land, housing, Companies. …
It doesn’t seem like a firm basis for economic revival if we are having to sell the ‘family silver’.
Over borrowing and selling assets built and paid for decades earlier to pay for a spending binge today…doesn’t seem like sound economics to me. Then how do we pay our way when the best has been sold of or to use economist speak, been ‘invested in’.

Reply It is not a zero sum game. An overseas investor may create more wealth, jobs, income for people here as well as for themselves. Take for example Tata investing in Land Rover.

Tata is a supreme example of a foreign investment that has worked out well – although of course profits after tax will go offshore.
An investor may create more wealth or decide (e.g. left out ed) to close several …. facilities ..Nestle closed a Uk Cadbury plant….
Our default response seems to be that we don’t do management and everything is better in foreign hands..

But desperate men do desperate things.. to cover up the economic mess we are resorting to the cannibalisation of our asset base. London is for sale and to heck with any local that wants to get on the property ladder.

Reply In a free society government cannot stop people selling their assets to foreigners if they wish to do so. Nor can a country which likes living beyond its means refuse to sell assets to pay for some of the bills. A company acquiring UK businesses may have at some point to close facilities or change them if demand falls away or if competitors elsewhere get better and cheaper. You cannot say to a foreign business buyer they have to run everything just as it was when they first bought it.You also need to remember that many UK people and companies buy businesses abroad and need freedom to run those as they see fit.

Excellent summary, its a pity government ministers and opposition spokespersons arnt able to make the case so clearly. Of course the taxpayers of rUK would not wear a UK govt agreeing to a currency union with an independent Scotland, with all that entails in terms of state debt and bank guarantees, fiscal transfers and mutual control over economic policy. If Scotland votes to be independent rUK voters and taxpayers will say ‘good luck but you’re on your own now’.

Scotland has only 8% of UK tax revenue, but the really frightening statistic for Scottish voters who are undecided should be the state dependency ratio – the number of people dependent on the state for their income, which is well over 50%. This works when the state providing the money is the 60m people of the UK, but is totally unsustainable for a small independent country with no competitive industries other than a dwindling stock of oil and a few odds and sods like whisky and grouse shooting.

I think Scots are far too sensible to vote for independence, but its amazing that 1/3 or so of them say they will!

Public spending in Scotland is about 10% higher than the average for the UK, but to a first approximation that extra money paid by the UK Treasury is matched by the oil revenues received by the UK Treasury which originate from Scotland but are not ascribed to Scotland, instead under the Eurostat system they are ascribed to a mythical land called “extra-regio”. With the separation of Scotland from the rest of the UK the UK Treasury would no longer be paying that extra money to Scotland but on the other hand it would lose almost all the oil, and some other, revenues which are not presently recognised as originating from Scotland. So anybody in England who assumes that they would taxed less if Scotland became independent is quite mistaken, in fact taking into account the additional costs which would arise the tax burden in England would be much more likely to rise. However it is clear that the government of an independent Scotland would not be able to sustain that significantly higher level of public spending in the longer term unless new sources of revenue were found to replace the declining oil revenues, and it is also clear that it could not both continue to use the oil revenues to fund current spending while at the same time saving them in a sovereign wealth fund.

Reply It also depends on how you draw the border out into the North Sea, a topic that has not been resolved. If you extend the line of the border around one third of the oil is in rest of UK waters. What all agree is that the oil revenues that Scotland claims are in decline and will likely decline rapidly from here, leaving the country in bigger deficit.

It has been resolved insofar as the UK government and Parliament have long ago set Anglo-Scottish maritime borders for various purposes and while there are slight differences between the lines drawn they will make no significant difference to the division of the oil. There is no way that the UK government could now belatedly propose a line so different that even as much as a third of the oil would be in English waters. You can regard that argument as having been lost a long time ago.

It will be the duty of an rUK govt post a Scottish independence vote to negotiate the best possible deal for rUK. As pointed out by JR the normal basis of allocation of offshore resources would be to extend the land border, which would give rUK 1/3. That is of course before another possible vote by the Orkney and Shetland Islands to remain in the UK, which could take rUK to 50% or more. Then there’s the argument as pointed out before that all oil discovered so far is the UK’s, not ‘Scotland’s’, which would mean an allocation pro rata to population. If anyone is voting for Scottish independence because they are expecting an oil revenue bonanza they are deluded. There’s a long way to go in this negotiation.

“Prof Kemp says there have been departures from the median line principle in various settlements around the world, including judgements made by the International Court.

He adds: “To complicate the matter slightly, in 1968, there was another line drawn from the border straight across the North Sea and that was for civil and criminal court problems. North of that line Scottish law prevailed and south of it English law prevailed.

“You might say we should use that line. The interesting thing is, from the economic point of view, it does not make much difference because there are just a handful of fields, and not very important ones now, between the median line and the line north of Berwick.

“Although lawyers could have a long debate about it, in terms of economics, it does not make all that much difference.”

If Scotland were to get a “geographical share” based on the median line it would mean about 90% of the UK’s oil resources would be under Scottish jurisdiction.

According to research by Prof Kemp, in 2010 the Scottish share of total oil production in the UKCS was more than 95% while for gas it was 58%. The Scottish share of total hydrocarbon production (including NGLs) was 80%. The Scottish tax share exceeded 90%. This reflects the much higher value of oil compared to gas.”

So you are quite wrong, there would be very little to negotiate about who got the oil revenues; and nor is it helpful to have greedy English Tories exacerbating the situation by trying to claim for England what would obviously be Scotland’s.

While that argument may have been lost a long time ago, that was in one set of circumstances and in the event of Scottish Independence there would be a whole lot of different circumstances.

Further, it is not just oil, there will be a whole mass of issues to resolve, unravelling 300 years of integration.

Salmon seems to think he can negotiate with Cameron, and Cameron is showing no sign of disabusing him of that view. But I think it is not Cameron he has to deal with but the peoples of rUK. One of the depressing aspects of this whole sorry sage is that while it is acceptable that independence is decided by the Scotts it is not acceptable that the rUK have no voice in the shape of what would result.

Oil is just one issue to be resolved, and precedence counts for little in such circumstances.

Exactly right. Its fair enough for Scottish voters to decide whether Scotland remains in the UK. But if they vote to leave the UK they will have to do so on terms acceptable to the rest of us. The voters and taxpayers of rUK will not allow an independent Scotland to join rUK in a currency union, nor will we allow them to walk off with 90% of the oil,or anything like. They can keep the windfarms though and subsidize them themselves.

It doesn’t matter where you draw the map around the oil wells, it’s where the oil is landed that matters; where the pipelines come up the beach. That’s where Scotland will have a man on the beach charging X Groats per barrel to land a lot of current UKCS oil and gas. It doesn’t matter if the oil is sold in US Dollars, the oil companies will still have to get some Scotish Groats to pay the landing fee. (The start of a tax based sovereign currency, just like the Pound; Dollar and Euro.)

With the currency, Salmond is worried that Scotland has a Balance of Payments problem with the rest of the UK, but these have a high percentage of financial services in them which are likely to sort themselves out. If you are a big dodgy bank, in Scotland, better to move south to a country with a big Central (bailout) Bank. Scotland is near enough BoP neutral with the rest of the world.

I reckon Scotland could easily introduce its own sovereign Groat currency, but it will have to let it float; not peg it to anything. The one thing the IMF is good at is starting up new currencies. And before you rant at me, the Euro is working fine as a currency, it is the EU that doesn’t understand how to design a fiscal policy framework to use it properly.

On the contrary I think that what matters is where it is extracted, not where it is landed. Obviously country A wouldn’t allow country B to construct a pipeline to take oil or gas from A’s territory onto B’s territory without any payment, that would be theft.

Your reply to me quoting some obscure professor is irrelevant Denis cooper. In the highly unlikely event of Scottish independence there will be a negotiation on this and other issues. There is nothing ‘greedy’ about a government seeking to do the best for the people it represents. Was Mrs Thatcher ‘greeedy’ to negotiate an EU rebate? Grow up and argue sensibly.

I’m sorry, but you’re the one who needs to start arguing sensibly. Just because you think that England should get its hands on a large chunk of the oil which clearly belongs to Scotland on any sensible Anglo-Scottish maritime border that doesn’t mean that you would be able to impose a line heading off to the north to bring it into English waters. The oil operations are not centred on Newcastle or even on Edinburgh but on Aberdeen, 120 miles further north, so why do you think that is? Have a look at the map.

Reply to Reply–Mercy!!–Please not the “extension of the border” again. I don’t understand how anybody could think that makes sense. though I suppose it is better than the ‘line of latitude’ which used to mentioned and looks good on a Mercator (projected artificial flat) map but which is easily seen to be inappropriate on glancing at reality in the form of a Globe. (Looking at a Globe), one smooths the coast line, draws a tangent at the relative point and the line at right angles is the sea border. One doesn’t need the tangent but it makes it clearer. Nothing else makes sense once one looks at a Globe. If there have been previous negotiations (apparently illogically based) they count for nothing. It is the essence of negotiation that nothing is agreed till everything is agreed. One might just as well say that Faslane was once agreed but tell the SNP that.

No answer last go round to the question where can one go one mile South, one mile East, one mile North and end up back where one started (apart from the North pole).

The UK government has a reputation to defend and so it would not allow its existing contracts with oil companies to become null and void any more than it would allow its contracts with gilts investors to become null and void. Where blocks fell within Scottish waters the contracts would be transferred to the government of the newly independent Scotland, and I doubt that even Salmond would be so stupid as to renege on those contracts with powerful multinational oil companies in the same way that he is threatening to renege on the contracts with gilts investors if the rest of the UK didn’t agree to his newly discovered desire for a continuing currency union. This is from a man who not so long ago condemned sterling as a millstone around Scotland’s neck, now he is passionately in love with it.

Would you please not bring up reasons for the Scots to reject independence so close to the referendum. They may read this blog in Scotland. If they vote to stay, we will not be able to move the Dartford toll booths to the A6 and A1. But, even worse, we will not be able to tell them to stick their peak wind power and have to keep turning gas stations off and on, at great expense. And, if they leave, they will not be able to stop English students from having lower charges, as we will be the same as other EU countries. So why encourage them to stay?

There are scores of countries around the world which would be much happier not to have land borders with their foreign neighbours, yet you crave the division of our home island into two separate sovereign states for trivial reasons.

Having fewer socialists dominating the HoC and amplifying the unfair proportion of the vote isn’t trivial. Also, the Scots would soon have to reduce taxes on Whiskey and other attractive measures in order to encourage tourism. It would be good to be able to go abroad without paying for a ferry, even if it was raining all the time and most of the meals in restaurants had added sugar. The scenery is wonderful too, if you can see it through the fog.

I don’t support breaking up the country just because too few Scots will now vote Tory, I’d rather see the Tory party wound up. They had strong support in Scotland at one time, but they threw it away; well, tough, I’m not minded to get rid of fellow citizens in Scotland or Wales or northern England or anywhere just because they won’t vote Tory. It is that kind of narrow unpatriotic partisan argument from English Tories which disgusts me more than any other.

Why indeed. But all these and other benefits depend on our glorious leaders being willing to play hardball during and after independence negotiations. Given what they have already conceded to persuade the Scots to remain in the UK the omens are not good.

No, the omens are not good but the people of England will need a number of acts of gross betrayal to wake them from their slumber, and a Scotch dominated British parliament handing English assets and long-term interests on a plate to the Scotch, with British compliments is only one of the shocks that are necessary.

A people that is too stupid to do other than continue to vote for those who are destroying their inheritance deserves all it gets. Unfortunately those of us who are not so handicapped must suffer with them.

Only an English Parliament can represent the interests of the people of England. Here’s to Independence (for England).

Because many of us have family connections with Scotland and Ireland and like the idea that we should all be one country.

The Conservative victory in 1951 was achieved only because of Scottish and Northern Irish support, not in spite of it so there is no reason to believe the Scots, and others, are fundamentally different. The Conservatives need to set about winning back those lost Scottish supporters.

A good start would be to stop ‘slagging off’ the Scots. The next step should be a restoration of the name Unionist Party.

Reply We are not slagging off anyone. 1951 was a long time ago, and Conservatives won a good few elections after that without getting much support in Scotland.

The Conservatives in Scotland have decided that they are so unpopular that they have virtually abolished themselves. ‘Let Labour do the work for the referendum and we can come back in afterwards’ is the sort of wrong headed remark I have heard. Hopeless. You need to get a grip up here and kick some a..

Its really just about making the case for the Union of GB and NI. It been left to the Labour Party to assume that role by default. Many people in Scotland vote Labour, not because they are particularly left wing, but because they do make that case and are the only credible alternative to the SNP.

Changing the name of the party North of the border has been a spectacular failure. Since Margaret Thatcher’s time, the Conservative Party is seen, not without justification, as being just an English Nationalist Party. Changing the name back is the obvious move, and really, it can’t make things any worse.

It may even be enough to stop those comparisons between the number of Scottish pandas and Tory MPs!

On 17 June 1944, Iceland was made an Independent Republic and seceded from occupied Denmark. Today that is their National Day. When their banks got into trouble – the whole country faced financial disaster. And the EU refused to allow the Icelanders to keep their fishing rights when the referendum was taking place, so the Icelanders were, in effect, refused entry to the EU as well.
Sometimes a bit of humility pays.

Clearly if the Scottish do vote for independence there would need to be further negotiation with the UK and the EU and then really a need for further referendum(s) to agree any final settlement. I think Cameron’s agreement to voting from 16 was very foolish until people actually start paying the very high taxes that the UK have they often have the very unbalanced, BBC think, magic government money tree, misguided views. If you ask someone who has never paid taxes if they want better services and more government spending it is like asking them if they would like a new free car.

You get the rather obvious answer.

This particularly in Scotland it seems. The UK should certainly not agree to Scotland using sterling without control of their monetary and tax system. What Scotland needs is (as indeed in the UK) far less government and far lower taxes, certainly not more and yet higher taxes.

Off topic the banks, even the strong ones, are still not lending freely to UK businesses not even for perfectly safe, secured & low loan to value, real estate investment lending. The new EU bank regulations and UK slotting rules seem to be deterring their lending hugely in the UK. This is very damaging to growth.

What is going on here JR? Why such reluctance to lend, such high margins and fees demanded? How can they get away with borrowing unsecured from depositors paying them virtually nothing then wanting libor plus 6%+ and high fees, for perfectly safe and fully secured lending to businesses. Get some real competition in banking and some competitive functioning banks they are getting away with robbery and damaging growth.

Reply The Regulators are still limiting lending in response to allowing too much of it prior to 2008

Have a heart LL. UK Sterling Banks are still writing off loads of toxic loans that are never going to get repaid by the borrower, so the bank has to pay it off with super normal profits extracted from the little people.

Clearly something is wrong with competition in the banking sector if they can pay depositors less than 0.5% yet then lend it out (& often well secured) to customers who are often a far better risk than the bank is itself and at about 12-30 times the costs of the money to them. What supermarket or industry can sell at 12-15 times their buying costs in a competitive market?

Something is hugely wrong with the market competition, get some real competition going.

Why should new sound & solid borrowers pick up the liabilities of idiotic lending by the banks in the past through paying huge fees and margins. In a competitive market they could not do this. These old losses are for the company and shareholders to take not new customers. It is clearly not a fair or open market or they could not do this.

There are two good reasons banks are likely to become more not less conservative in business lending: regulators are now trying to make a criminal offence out of bad business decisions; and the proposed controls on pay disincentivise any risk taking. If you back a business because it offers higher returns for higher risk but are under threat of prospection if it goes wrong, and if it goes well you can’t be rewarded for 10 years, why do so? I don’t work for a bank or make loans, but if I did I would be very careful indeed who I lent to.

You could always use a pay day loan company. They are very competitive. Why should the banks fund another housing bubble like last time every home builder and landlord has a fool proof project, no doubt you too. The magic money tree seems to be funding landlords via an ever rising housing benefits bill rather nicely. Is that BBC think?

Housing benefit is a benefit for tenants not landlords. The tenants get the use of the property. The landlord would just rent elsewhere if they could not pay.

I would not really pay more than about base plus 3% on loans other than exceptional circumstances. Loans at more that about 35% APR should in my opinion not be allowed other than in a few special circumstances. They can help almost no one at those rates, other than those who do not intend to repay and just create misery.

They would make up for a 12 billion shortfall by renting to fully paying tenants not on benefits for the same amount? As if. The rental market is supported by benefits subsidising landlords and inflating property prices and rents from taxpayers in turn subsidising low wages. A free market would be interesting, but as property costs rise there are many to fill the gaps left by benefit cuts. The government got a surprise there. loans with rent of above 35 % should not be allowed but rent on housing can be whatever the landlord can get away with. Use you brains for once or is it taking money away from landlords?
No answer as it is to difficult for your right wing simplistic thoughts.

It was left wing “simplistic thoughts” during the 13 years of Labour misrule which brought us to this point Baz.
Gordon Browns had an ambition to create a larger client State always voting Labour.
This led to a huge rise in those getting income and/ or housing benefits.
You can get such benefits even if your household income is near the higher rate band.
Wages and rents have adjusted to this situation.

Wages and rents have adjusted to the situation?
If you didn’t notice housing costs have tripled and wages are about the same as they where in the early 2000’s, leaving a large amount of people unable to afford homes. Housing benefit can be blamed for some of this rise, but not all.
(refers to Westminster Council policy of selling off houses – ref deleted as I do not have time to check what actually happened in the court case ed)
I remember the housing market of the late 80’s and this is why I own my home outright and do not believe or trust anyone and especially politicians when they talk about the housing market. Even those most involved never saw the prices today ever being real and this is the reason I can maintain my living standards despite no pay rise since 1996.
I cut my living costs instead and the world looks different when you own a house outright.

Indeed rents have risen and wages have not risen.
This is mainly because there is a generous subsidy on rents being paid by the State.
And employers know their staff will get generous top ups from the State.
The huge increase in population recently, has not helped with either of these problems.

This is very true employers have and I have experienced this, see benefits as a top up for wages and have seen and have told them myself it is in addition to wages laughably one even asked me, a manger in a very large company, if I could pass on my cost savings in living expenses to the company. My reply was what did he need all his money for as his wife had a good job and lived in a very expensive house. Idiot was outraged. This is where it goes if they can get away with anything.

‘What Scotland needs is far less government’ and we could start with demolishing the phoney parliament and reducing the number of councils and their jobs-worth chief executives on large salaries and pensions.

“The reason Alex Salmond cannot answer the currency question is he does not truly want Scotland to be independent.”

And

“The true answer to Mr Salmond’s question is just this. His kind of independent Scotland would need a transition period . . . .”

That is three times in two days you have used that metaphorical hammer to hit that nail. I am beginning to think that you may need more holiday’s to keep this rate up.

But the thing is, we need to look long term. And to my eyes at least, it is not a happy future. We are infected with illiberal Liberals who do nothing but pontificate. To coin a phrase by Lady Thatcher * “They think because they have said something, that something has happened.”

It is the sheer vacuum of ideas around issues such as this, and the lack of proper and real debate, such as Salmonds hypocrisy over independence, that what gets my goat. People are not being properly informed. It is not the right of politicians to dictate the way in which we wish to live. They are there to represent OUR views and interests. A small matter that is lost on a great many.

But so many politician do think that if they make a speech, they have actually done something. The ones who actually try to do something constructive seem to get fired like Owen Patterson and Michael Gove. In Cameron’s pro EU land we are ruled by unelected bureaucrats and regulators. The ministers are just actors going from husky photo op, to huddy photo op – putting a silly PR veneer on the undemocratic scam. They either say things that are so obviously true that they do not need saying, or just blatantly lie to the public only to rat on it later.

We elect only the joker ,career politicians and spin merchants putting on the thin top superficial veneer.

Gove was not constructive this is why he is gone, but anyway if they did do something it would be absurd and pointless and best left to market forces would it not? Imagine your and the likes of you reaction to any interference by government and regulators at the height of the banking/housing boom. You would have been screaming blue murder.

Nonsense the government/regulators were insuring bank depositors and should clearly have assessed the risks they were underwriting through this and have intervened if those risk were too high. Or charged more for the insurance they were providing. They were hugely incompetent as usual.

What LL is saying is that as the State was underwriting deposits they should have taken more care with monitoring and controlling any over stretching by the Banks.
That was their role.
And they failed.

Had the state tried to correct this liflogic and his like would have been screaming blue murder about interference and socialism on a free market restricting lending to a self balancing market.Count on it. We saw what happened when the right wing bankers where allowed to do what they want. Socialism for the rich ripping of business and the state in a number of corrupt and even criminal ways.Then threats when it all failed. Threats after all that?! To this day many cannot believe anything went wrong and what did was all the fault of a socialist Labour government. Get real.

Reply Labour set up a new and very detailed regulatory system for the banks on gaining power. That system failed and gave us a huge banking crash. It was not unregulated competitive capitalism, but the mega mergers of a heavily regulated RBS that gave us the trouble. As an advocate of more competitive free enterprise I was warning them a) not to allow the mega mergers and b) to demand more cash and capital from the monster banks they encouraged.

The banks ran rings around this regulation leaving its effectiveness limited. they did what they liked and we saw the result. Where do the banks fit into this John with their know best attitude backed up by every deluded right wing nutter at the time not to mention most of the Tory party that opposed almost all regulations because and guess what? Banks knew best. All under a Labour watch I must add who believed all this deluded nonsense and some of the idiots on this site they say the public must have been more careful of which banks they used despite their rigging and criminal activities that even the most insider insiders were surprised at.

Reply: More Labour lies. I wrote the Conservative Economic Report in 2007 which said they needed to be firmer on bank cash and capital requirements, which lay at the centre of their errors.

The core SNP objective is for Scotland to be independent from England, and for that most of them are prepared to accept a large degree of subordination within an EU of many countries as being preferable to subordination effectively just to England within the UK; however to win over a substantial section of the voters in Scotland they have to pretend that they want to keep the pound, just as they have to pretend that they want to keep the Queen. Once the votes had been counted and the independence referendum had been won it would be an entirely different matter, not least because (as they well know) some other EU countries would not agree to the treaty changes required to keep Scotland in the EU, and therefore the EU Single Market, unless it committed itself to joining the euro. Indeed when Cameron was proposing those treaty changes on Scotland’s behalf, as he would have to do while Scotland was still part of the UK and therefore Salmond still lacked any standing to propose EU treaty changes, it is not beyond the realms of possibility that he would come under pressure to agree that the continuing UK would also commit itself to joining the euro. The reality is that a “yes” vote on September 18th would instantly change Cameron from being somebody who was boldly seeking EU treaty changes for repatriation of powers to the UK, allegedly, into a supplicant begging for EU treaty changes just to cope with the impending break up of the UK. Personally I would very much prefer not to see that scenario being played out, and that in itself is one compelling reason why I am hoping that it will be a “no” vote.

Well said Denis. I don’t know if you have had access to the deluge of SNP propaganda that has been pushed through letterboxes here but the ‘market’ that the SNP are aiming for is one that would probably not be impressed with reasoned economic arguments or have any understanding of these arguments. It’s the ‘money tree’ lie and nebulous promises of some kind of socialist utopia where everything will be free and provided by the ‘Scottish Government’ in a ‘fairer society’. Could be out of the Morning Star.
Your comments about the Queen and the pound are spot on but there are a lot of people in Glasgow, the key area, who want to believe this pack of lies.

There was a girl in the audience for the debate whose concern was there should be more money spent on promoting Gaelic, she being a native speaker so she claimed. Set aside the fact that there are now about as many people in Scotland with Polish as their first language as there are with Gaelic as their first language, efforts to promote Gaelic are already devolved to the Scottish institutions and if it chose the Scottish government could already spend more on that rather than on other things under its control.

probably not be impressed with reasoned economic arguments or have any understanding of these arguments.

I would say that most commentators on this blog don’t understand economic arguments. The exceptions would be Acorn and John Redwood himself who does understand but is in a difficult position politically when it comes to explaining how the economic system really works.

Nearly everyone who gets it wrong fails to appreciate that government is an issuer of currency not a user of currency. With just that one simple appreciation it is easy to see that all talk of governments being like households and having to balance their budgets, and they have to borrow to avoid running out of money is just so much nonsense.

Governments have only two constraints. Too much spending and/or too little taxation produces unacceptably high inflation. Too little spending, and/or too much taxation produces unacceptably high unemployment and business failure.

The size of the deficit is often understood to be about the size of government. It shouldn’t be. It’s an entirely separate issue. The size of government is a political issue. The UK electorate can have any size it wants. The size of the deficit is an economic issue. The factors which determine it are largely outside of direct government control.

Alan–I do not understand why giving tax raising powers to the likes of Salmond would be such a joy for the Scottish people. If I were a Scot that alone would be enough for me to vote No TVM.

It is beyond belief that Salmond seriously believes that the Bank of England would continue as Lender of Last Resort. I think Mr Darling should plug this simple point more. He should also concentrate more on the “Better” in Better Together so that when Salmond asks, “Would Scotland be successful on its own” the answer should be, “Maybe” but it would be “Better Still” staying in. Just because one CAN do something does not make it right or best.

He will get what he wants with spades after the vote, who ever is in government will give Scotland more power over tax and other levers. Which will be a shame as he will crow over the rest of the country. He blames Westminster for all ills in Scotland.
The Scottish parliament could spend its money alittle more wisely and help the people more instead of on vanity projects.

All hypothetical because Scotland are going to vote NO because devo-max is what they, not just Salmond, wanted all along and now they know that all three leaders are queuing up to give them whatever they want if they say no, it’s mission accomplished. Scotland can’t lose. They will have the best of both worlds – completely running their own affairs whilst UK Governments of all colours will still continue to chuck more than their far share of UK (English) taxpayers’ money at them. Not one word has been uttered about the scrapping of the Barnett Formula nor the ending of the insulting practise of Scots MPs (and Welsh) being able to continue to vote on English only matters when Scotland gets devo max. No doubt you and your colleagues will be fine with that John?

“The problem with this model is the rest of the UK and the rest of the EU will have views on what kind of a deal he could do”

Since when did what the rest of the UK think matter to the rotten self serving political elite at Westminster? How can they have a view when the majority of them are English and to them the English do not exist. The English are not entitled to have views which is why not one of the anti- English Lab/Con/Libs ever asks them.

And its even worse for the English working class, they have been totally disenfranchised, the party setup to represent them has totally abandoned them and pursues a nutty mass immigration and so much more agenda, the other parties only listen to the middle and upper classes, and so on

Anyone who claims to want independence whilst simultaneously stating their intention to keep the country in the EU is at best naive. In the televised debate this week Salmond said “My case this evening is simple – no one, absolutely no one will do a better job of running Scotland than the people who live and work in Scotland.” – clearly he forgot to include: the EU Commission, the Council of the EU and the European Parliament. The man is a charlatan.

I completely disagree with those who claim that Salmond’s real objective is only further devolution of powers to Scotland within the UK. The real objective is independence from England and the English, even if that necessitates submission to a pan-European system rather than true independence. While obviously it might not be an ideal situation he would rather have Scotland’s trade and foreign and security and defence policies set in Brussels by agreement of a large group of countries of which the UK dominated by the English would be just one, just 8% of the votes, rather than have them set in London by a Parliament dominated by representatives elected in England, 82% of the votes.

As an Englishman, I would like independence from the Westminster cartel of English haters, doing everything in their power to destroy our indentity, our heritage and our culture; of course the impetus for this hatred comes significantly from those are themselves not, in point of fact, English. We are going down the pan by design so who would wish to be associated with a nation of losers?

Yes, their hatred of the English, or perhaps more specifically their hatred of being ruled by the English, or perhaps even more specifically their hatred of being ruled by the English Tories, is that great, and that shows all the time even when they try to conceal it; and in some ways I can well understand why that should be the case.

There are many people in Scotland who have no sense of reality and no grasp of economics. Don’t forget that this area of the UK, mainly the central belt, has been a benefit hand-out drug addict for decades and many people have no conception that things could get worse with separation. Glasgow is where the SNP will either win or lose. It is the key city in the battle to save Britain and the SNP know it. This where they will create their Marxist utopia or lose to the Unionists. The SNP have gained a strong following from bitter republicans who have a visceral hatred of the Union flag.
They are not Nationalists, they are Marxists.

Let’s be more precise. Mr Salmond wants power without responsibility. He wants to keep the pound but be able to control fully Scotland’s fiscal policy and to force England to cover any shortfall. He also wants to get the Bank of England to underwrite Scottish banks, who behaved more recklessly than their English counterparts and continue to do so. And he wants to share our monarchy, as a card to play to avoid being sucked into the Euro zone.

He will make lots of smoke and mirrors based on the slogan “It’s Scotland’s oil”. No, it’s not – it’s Scotland and Shetland’s oil, and the Shetland islanders do not want to be part of Scotland. And how will he take into account the investment already made by England and by international companies?

When on holiday in Scotland earlier this year, I heard the view that Salmond himself did not actually want independence prederring devomax; and that he went along with the campaign because the SNP membership actually does want independence. There would be the added bonus that the campaign would spur on devomax offers from Westminster politicians, as has indeed occurred.

Maybe when the next debate is held, Mr Darling can dissect in more detail the implications of Scottish independence, as you have here, and further expose the wishful thinking behind the SNP campaign. There needs to be a decisive demolition of the Salmond/SNP arguments before the vote, otherwise they will drag on and on and on, poisoning the political climate in the UK for years to come. If not, it would be better if Scotland voted Yes, got out and faced the consequences.

The mention of “transfers” brings to mind another kind of “transfer” which is also at the heart of Scottish Independence, that of the transfers of people across national borders.

One realistic scenario post independence would be Scotland in the EU and the rump UK out. Bearing in mind one of the main reasons for “out” is the adverse consequences of the free movement of labour, it would make no sense what so ever for there to be a totally open border between England and Scotland. I think we would have to build Hadrian’s Wall MkII.

If the “Yes” vote succeeds I wish to know how the Scots will redeem their share of the UK debt . Salmond has publicly vowed not to honour or repay it – how can we ensure that Scotland would ? I fully agree that the North Sea Oil boundaries should be clarified and the revenues distributed to reflect the division . Cameron was wrong to agree to this referendum in the first place ; he has created a storm we all wish did not happen . The best decision would be to bring to a halt the devolved governments and concentrate on the value of a truly United Kingdom .

Reply The UK Treasury has made clear the rest of the UK stands behind all the UK debt, for obvious reasons to avoid destabilising markets. However, Scotland’s share of the debt if not agreed with Scotland can and should be identified as Scotland’s debt, and if Scotland refuses to pay the interest to the rest of the UK on it the new country would begin life in default on international debt markets, which would place it in a difficult position.

There are always two sides to the balance sheet. The debts or liabilities and the assets. So the UK National debt is also an asset of all those who own that debt. ie gilts or National Savings accounts or whatever. So, the debts are equal to the assets. In fact the UK government has to assume that debt so that its citizens, and others, who wish to hold financial assets in sterling can do so.

Some of those holders will be Scottish. If, and when, Scotland assumes independence those holders will, subject to the laws of Scotland, be able to keep their financial assets in sterling or transfer them to whatever currency the Scots choose to use after independence. If the former, nothing much changes. If the latter, the debt will be assumed by the new Scottish government. Either through its Treasury or Central bank.

“Salmond has publicly vowed not to honour or repay it – how can we ensure that Scotland would?”

I’m sure Salmond realises that exports to the rest of the UK account for about a third of Scottish GDP, while exports to Scotland have only about a tenth of that importance to the economy of the rest of the UK. I’m sure he also knows that he would need Cameron’s help to keep Scotland in the EU and therefore in the EU Single Market. So no doubt he knows that he would actually be in a weak position for imposing his will or threatening reprisals during negotiations, but of course that doesn’t stop him trying to bluff his way through.

I find devo max extremely worrying. It should only be implemented if the same devolution is implemented in Wales, Northern Ireland, and most important England.

The English are fed up with their laws etc. being decided on by Scots to whom they do not apply. If devo max is properly implemented the Scottish MPs should only need to attend Westminster about two days a week and there would be a smaller number of them giving all constituents equal representation.

How many times does it have to be pointed out that electors in Scotland are no longer significantly over-represented at Westminster? They used to be, but since the establishment of the Scottish Parliament the same electoral quota has been used in Scotland as in England. Strict application of that quota would lead to 57 seats in Scotland, there are just 2 extra because of geographical difficulties. On the other hand electors in Wales and Northern Ireland are still significantly over-represented, so if there are to be complaints about over-representation of electors outside England then they should be made in those directions.

The SNP position is illogical on a number of fronts. If you follow the debate carefully there is constant reference to the economic success of Norway with its massive sovereign wealth fund. But Norway built that fund by staying out of the EU, consequently it retained its fisheries, unlike the UK, and most importantly its oil and gas revenues. Yet the SNP says that Scotland will join the EU, making comparison with Norway a practical impossibility. Indeed it seems completely unlikely that the EU would return the Scottish fisheries to Scotland on accession. Furthermore, it is not impossible that EU negotiators would demand that Scotland’s oil and gas reserves be pledged as an EU petroleum reserve. Why wouldn’t they?

Dog–Re Scottish Fisheries, the EU doesn’t ever willingly (not that I care much on any subject whether they are willing or not) return anything to anybody: this is just one aspect that makes it so hated; but they are too hidebound, and even scared, to see, never mind act on, it. Obviously Luxembourg should have a chunk of Scottish Fisheries–you know it makes sense.

Personally if rather not have a currency standing behind banks! Or interest rate manipulation and all the other central bank interference.

But I agree with your main point that if you do have that then you want to be setting monetary policy, not someone else. I also agree that it is bizarre to claim you want independence then say you want to submit to the control of the eu!!

As Dennis Cooper points out its more about wanting to separate from England for Salmond not about real independence.

Scotland will get whatever it wishes, they won’t be tough on Scottish demands – so watch out for U-turns and concessions on their so-called toughness – because Unionists in Westminster who rule over the English don’t really identify with or care about England. They see England as a place which they call Britain and Scotland as a romantic getaway. They will not give England the same dues as they have and will continue to give Scotland, because they know that if they do, that will be the end of them. So their motive is to preserve their own power base at all costs.

Lots of talk of Devo-Max on here but I would be grateful if somebody would define what it means? It’s original usage described a system whereby Scotland had full fiscal autonomy within the UK but that is never going to happen because of the reasons stated above and by Mark Carney in Edinburgh last January. i.e. you cannot have fiscal autonomy within a monetary union.

All that is being proposed by the main parties is that most or all of income tax raised in Scotland would be controlled by the Scottish Governent post referendum. This is entirely sensible in order to make the Scottish government financially accountable. The current system of financing via a block grant introduces all sorts of negative incentives into the system.

VAT, NIC, Corporation tax, duties on fuel and alcohol etc. will all continue to be controlled by the UK government as will pensions and the vast majority of welfare payments.

The reason Alex Salmond cannot answer the currency question is he does not truly want Scotland to be independent. He wants devo max.

It’s good to see you state that JR. I’ve been telling you for about a year now.

Salmond wants to be Prime Minister of Scotland. He wants Devo Max in his armoury and the Bank of England as back-up for when it all goes wrong.
That is exactly what the Lib/Lab/Con will give him as silver medal in the ‘independance games’
Meanwhile, Westminster will continue to fund Scotland via the discredited ‘Barnett formula’ Whilst allowing Scottish constituency MP’s to vote policies onto England (and Wales/NI) even though they will also continue to ignore the existence of this country, England.
Unless someone speaks up for us………………Over to you John.

Scottish Labour MPs and others losing their jobs and prospects.
Having an actual, proper Conservative government in England to the screams and protests of the left wing, greens and liberals followed by the proper re-allocation of constituency boundaries, removing the in built, unfair labour advantage.
Lots of pressure groups and individuals would lose their influence.

I am pro Scotland staying as part of the UK, but if Scotland was going to leave the union then it would have been nice if they left before the merger you mention above – where a Scottish PM mashed together a failing Scottish bank and a solid English bank, and would have brought both down if it wasn’t for the UK government propping up the failed merger.
We in England were are so trusting, I find it appallingly dishonest that Brown misused his position in this way, small consolation that he was voted out of office without ever winning an election.

Not true. The merger of Lloyd’s & HBOS could not have happened without the ratification of the shareholders. The shareholders of both banks voted for it.
Lloyd’s had been sniffing around HBOS for years but the problem was the MMC. All the UK government did was neutralise the MMC to facilitate a merger.

So why are we giving the Scots even more powers if they vote “no”? This is complete lunacy to give them MORE to stay with us. They get what they say they want if they vote “yes” and NOTHING if they vote to stay.

Why aren’t the Welsh threatening to vote for independence in the hope that they will get even more powers if they vote to stay with us. And what about Northern Ireland ?

It is rather like being given a referendum on whether to stay or leave the EU but you have said you want to stay anyway and will campaign for that outcome – what, exactly is the incentive for the EU to give us any change? Your government is packed with idiots.

Mr Salmonds proposal that Scotland can be “independent” and yet use the currency of what will then be a “foreign” country simply never made sense. He proposes that almost all economic and fiscal policies be based upon the Central Bank and Government of another Country. This is, by definition, NOT independence. Having most policies decided by Eurocrats in Brussels is far from “independence”. I believe our own Government should not have offered “Devo Max” which essentially gives Mr Salmond all his wishes and with somebody else picking up the bill.
Included in the “price” of “Devo Max” should be the immediate and permanent ending of the openly anti-English policies of the Scottish Government. For example free tuition to all European citizens but exclusively and specifically NOT the English. Such a policy is morally indefensible.

Oh God please let them vote yes. In the event a “No” vote succeeding it would likely be by a very small margin and the thought of something like 49% of the Scottish population still hating us would be too hard too bear.

Who can blame the Scots for wanting to leave ? – as a Northerner I would prefer them to stay as I feel we have more in common with the Scots than London.

We are ruled by a Blair clone that was willing to arm a pick-up truck rag tag of an army at the drop of a hat.
Successive London based governments sold of most of the oil and gas when it was cheap and used dwindling supplies of gas for electricity generation.
The nations finances are in a complete mess with a balance of trade firmly in the red.

GDP per capita is going down because of an unwanted surge in population brought about by mass immigration. Services are stretched to breaking point without the money needed to expand them.
Being British means nothing …anyone with a sob story or claiming to be a self employed car washer can get citizenship. We don’t value the status of British citizenship anymore and hand it out like confetti – so why should the Scots value being ‘British’ anymore.
A disaster of our own incompetence and negligence.

“… My bigger fear is that while Scotland may become officially independent, it would still be viewed as UK backed by global markets in the event of another crash. Could London really stand idly by if Scotland’s large commercial banks – some still with vast liabilities, and still unresolved off-balance sheet losses – imploded, given the complex web of cultural and financial links between us? Of course not. The risk to the rest of the UK’s financial markets and credit-rating would be too great.

Scotland’s often rapacious financial services industry knows this only too well, and could become ever more reckless – especially if a newly emboldened independent Scottish government adopts a lax regulatory regime in an attempt to ‘compete with London’.

An independent Scotland will keep using sterling whatever Westminster says, and its banks will continue to rely on a London-launched bail-out, knowing it will come even if a formal currency union is denied. That’s why the entire UK should have a vote in this referendum, because the entire UK will have to rescue Scotland if its vast banking sector goes bust. That’s the biggest danger posed by Scottish independence, as I’ve said before – a massive McHazard.”

It’s time to tell Mr Halligan that he’s wrong, that will be no such rescue, and to copy in Mr Salmond, Mark Carney and the entire national and international media. While we are about it, we should tell English banks that next time they too would crash and burn. Banks are businesses; they are NOT SPECIAL.

Don’t worry – the banks’ shareholders will impose the necessary constraints on the banks’ conduct. It just needs courageous politicians.

JR To join the Euro Scotland would be required to cut its debt and deficit to qualify.
What debt ?. As Scotland has the officially backed ‘victim’ status it is inevitable that her debt will be cancelled by England (the oppressor). Idiotic PC logic but that is how the world works in 2014….and why the Conservative party should be fighting it with every ounce of strength it has instead of supporting it.
Scotland has already had a good deal of special treatment (noticeable how much better the roads are north of the border) + free tuition fees, no prescription charges etc. so wiping away the debt with a swipe of the BOE’s hand will just be more of the same.

About John Redwood

John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.